Skilling and the Supremes: the irony of 'honest services'

Skilling's $50 million may pay off

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October 16, 2009

Unlike many of his decisions as an executive, Jeff Skilling's decision to spend more money on lawyers than any defendant in history appears to be paying off.

This week, the Supreme Court decided to review Skilling's conviction. Up to now, it appeared the failed Enron executive had spent something close to $50 million on a defense that did little more than land him in jail for 24 years.

Skilling's attorney, Dan Petrocelli, may have lost at the trial court level, but he scored a victory this week by getting the case heard on the arcane legal issue known as “honest services.”

There's a touch of irony in the decision. Little about Skilling's reign at Enron involved honesty.

This is what good white-collar defense lawyers do. They dissect the language syllable by syllable until it's divorced from reality.

So when the Supremes review “honest services” they won't simply pull out their copy of Webster's and find that honest means truthful. They won't accept that services, in the context of a chief executive, reflects his fiduciary duty to shareholders and employees that he won't lie to them, distort numbers, hide debt or encourage and reward behavior that will lead to the destruction his company.

In this legal Wonderland, Skilling may succeed in his claim that, essentially, he was providing honest services by deceiving shareholders because it made the company's stock price go up.

In all likelihood, the concepts of duty, responsibility and accountability that most of us recognize as inherent to the title of chief executive won't even enter the debate.

The arguments may overturn some of Skilling's convictions, and it may get him a new trial. A new trial would indeed be, to use Petrocelli's term, a “game-changer” because this time Skilling can employ a strategy he couldn't before: blame the dead guy.

Without Ken Lay sharing the defense table, Skilling can simply argue that any crimes at Enron were perpetrated on Lay's watch. Skilling, after all, bailed on Enron before it sank. It was Lay in the corner office when the ship went down.

Though his defense team will argue otherwise, it's unlikely an honest services ruling will overturn all 19 counts on which Skilling was convicted. Most likely, he will still serve more jail time and he will still be a felon.

It's not the job of Supremes, though, to decide Skilling's guilt. They are weighing the issue of whether this obtuse legal phrasing of “honest services” is being used too broadly, whether prosecutors see it as a sort of legal crescent wrench, that can be adjusted to any case in putting the screws to defendants.

Clearly, even appeals courts can't agree on how the doctrine should be applied. The Fifth Circuit, after all, didn't even agree with itself, upholding the use of the honest services argument in Skilling's case but rejecting it in another Enron-related appeal.

Meanwhile, from his prison cell in Colorado, Skilling weeps tears of joy at the chance to try, once again, to revise history, as if clicking his heels and repeating “there were no crimes at Enron” will transport him from reality into the legal Land of Oz.

For Skilling, the path is lined not with gold but the millions showered on top-notch legal talent that after years of setbacks has finally found a loophole big enough to squeeze their client through.

In that, he's actually accomplished the exact opposite of what he did at Enron. There, he championed decisions that paid off in the short-term but had disastrous long-term consequences.

Far from being his worst decision, it's now clear that if Skilling had been as adept as an executive as he is at hiring lawyers, he'd still be running Enron.

Loren Steffy is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com.